Eight people are injured after a vehicle ploughed into pedestrians in the Italian city of Turin. The incident, which occurred early this morning, has sent shockwaves through European capitals. London, in particular, is demanding answers as the spectre of terrorism looms over yet another European thoroughfare. The attack, which saw a white van mount a pavement in the heart of Turin, is a grim reminder that the cost of security is a line item that never truly closes.
Italian authorities have confirmed that eight individuals were struck, with three in a serious condition. The driver, a 43-year-old Italian man with a history of mental health issues, has been arrested. But the immediate diagnosis by the press and public alike is terrorism. With the city already on edge following the recent ramping up of security protocols, the market for fear is trading at a premium.
From the Square Mile, this is understood as a liquidity crisis of public safety. When the state cannot guarantee the safety of its citizens, the cost of risk increases. It is a bond that matures with every violent incident. The British government, through the Home Office, has issued a statement expressing solidarity with Italy and reaffirming its commitment to security. But the tone from Downing Street suggests a deeper concern: the threat level in the United Kingdom has been at 'substantial' for months, and this event will not have soothed nerves.
The attack comes at a time when the British economy is already contending with inflation above target and fiscal tightening. The cost of maintaining security at such a high tempo is a drag on public finances. Every pound spent on counter-terrorism is a pound not spent on healthcare or education. It is a classic trade-off, one that the Chancellor will be acutely aware of as he prepares the Autumn Budget.
Market reaction has been muted so far, but we are watching the sterling futures and gilt yields closely. Any perception that the government is losing control of the security situation could trigger a sell-off in government bonds, increasing the cost of borrowing. That is the mechanism by which terrorism hits the bottom line.
In the City, we are used to pricing in risk. The question now is whether the Italian government will be forced to raise its insurance premium, so to speak, by allocating more resources to security. And what does that mean for the stability of the Eurozone's third largest economy? The contagion risk is not just physical but financial.
We have been here before. The 2017 attacks in London and Manchester saw a swift security and intelligence response, but they also saw a spike in volatility. The FTSE 100 dipped, but it recovered. The key, as always, is market confidence. If Turin proves to be an isolated incident, then the shock will be absorbed. But if this is the beginning of a new wave, then the economic damage could be significant.
For now, the prudent investor adopts a wait-and-see posture. The authorities are treating this as a terrorist attack until proven otherwise. The narrative of fear is a powerful one, and it can move markets. We will be monitoring the investigation closely, because in the end, the truth will set the price free.
